Date: Fri May 08 2009 - 16:02:41 EDT
Aid Blamed for Lack of African Development
Zambian economist Dambisa Moyo is stirring up debate by arguing
financial assistance has created a culture of dependency in Africa and
should be cut. From Washington, VOA's William Eagle says she is making
her views known in a new book called Dead Aid.
Economist Dambisa Moyo says aid to Africa has failed. In her new
book, Dead Aid, she says poverty rates in sub-Saharan Africa have
increased during the past 40 years from 11 percent to 66 percent. But
at the same time, donors have given the continent billions of dollars
in development funds.
A graduate of Oxford and Harvard, Moyo, who formerly worked for the
investment firm Goldman Sachs, says aid harms Africa in a number of
In remarks in April to the Carnegie Council in New York, she said aid
raised by international celebrities and NGOs sometimes help prop up
ineffectual leaders. It also relieves governments of one of their
primary duties - providing services for their people.
?MOYO said, "In many African countries, the government is basically not involved in
society. They do not have to cater to their people, they spend their
time courting the donors to get more money. That basically means that
they have abdicated their responsibility."
Moyo says international lenders perpetuate dependency on foreign aid.
She says in many countries, the International Monetary Fund writes
"Basically, we end up ... where African governments are spending about
$20-billion in interest payments every year. That money is being spent
to keep the system in place. So you pay a little bit of money to the
World Bank and they re-lend to you. Or you pay a little bit of money to
Norway or the United Kingdom or U.S. aid agencies, and then you get the
money back." ,said Moyo.
Moyo says aid also feeds conflict. In states without
developed private sectors, factions fight for the only entity that has
a pool of cash, the government.
She says aid also causes inflation: Economists say aid can drive up
exchange rates, damaging growth by making exports more expensive.
The economist says without aid, governments would have to raise taxes
by strengthening the private sector or collect them from the
electorate. This, she says, would create an expectation of
accountability on the part of the public.
Moyo says the government could also raise money from
issuing bonds, particularly on the capital-rich markets of China and
the Middle East.
In the early 1990s, the World Bank conditioned aid on a number of
changes meant to encourage exports and engage in international trade.
Among these so-called "structural adjustments" were calls for cuts in
government spending, greater foreign investment, growth of the local
private sector and increased exports. Many credit the policy with
lifting African growth rates to more than seven percent per year,
reversing a decade of decline.
Moyo is not impressed:
"All the positive things we have seen in Africa in the past five to 10
years have been in spite of aid, not because of it. We will never be
able to strip out the commodity effect - the boom which has been huge
impetus for growth numbers in recent times. My view on aid is that it
is incredibly destructive and over the long term will not create jobs,
alleviate poverty or spur growth. I have not heard from any one
advocate aid to say it is generating jobs."
But some economists say aid linked to the adoption of free-market policies has increased exports and employment.
Development economist Paul Collier writes that aid has added about one
percentage point to the annual growth of the "the bottom billion."
Without aid, he says, the poor would have become poorer.
Shanta Devarajan [day-vah-RAH-jahn] is the chief economist of the Africa region at the World Bank.
"[During the past 15 years], aid has increased, and African countries
have grown rapidly ... It would be presumptuous to say there is a
direct link that every dollar of aid generated this growth. But some of
that aid supported policy reforms or built infrastructure that enabled
these countries to benefit from the increase in commodity prices, and
they grew. And it is not just oil [producing states], There are 21
non-oil exporters that grew at over four percent a year for over a
decade and a half."
Others note that since the end of the Cold War, aid has been used more
effectively. In some cases, donors channel aid through NGOs rather than
corrupt or inefficient bureaucracies. The U.S. Government's Millennium
Challenge Accounts allot aid only to countries with a record of good
Moyo says she supports the efforts of the International Monetary Fund
in the short term to help African countries withstand the global
financial downturn. But over the long-term she wants Africa to find
better ways of financing development. (SIGNED)